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Missing Mortgage Payments & Morgage Loans

Updated on April 27, 2008

Mortgage Payment Information

Home owners across the country are facing adjustable rate mortgages that having increasing payments that make on time payments next to impossible to make. If you are a home owner that is facing this stress because you missed two or more mortgage payments you need to be aware of how serious of a problem you face and what you can do about it.

Dealing With Multiple Late Payments

The first thought for people with past due mortgage payments is the fear of foreclosure and losing their home. While technically a mortgage lender can start to foreclose after just one late payment many lenders will not start until you are 120 days past due. So even with two missed mortgage payments you should still be in the safe zone, at least for a little while.

When you miss your first mortgage payment you will limit your ability to refinance with a conforming mortgage for a minimum of 24 months. You will also not be eligible for FHA or VA financing for a period of 12 months. The only way you will be able to refinance with multiple late payments is to get a sub prime mortgage, and you will more then likely be limited to borrowing no more then 70% of your homes appraised value.

Once you miss your second mortgage payment your options now almost begin to fade away into nothing. Since the recent sub prime crisis most of sub prime lenders programs for borrowers with multiple late payments have all but disappeared. The best option at this point is to call your mortgage holder and work out a repayment plan with them. If your loan was an adjustable mortgage you should ask them for a loan modification. This is where the lender will either give you a fixed rate mortgage or stop any additional rate increases for a set period of time.

The most extreme option for home owners who are missing mortgage payments is to sell the home and either move into a more affordable home or rent until they can save up a good down payment for a similar home. While no one wants to lose their home sometimes it is the best option, and in many cases it will inevitably happen through foreclosure. At the very least you can save your credit rating by selling the home before a foreclosure happens.

Honesty is going to be your best option when you are in this type of situation. Your mortgage holder will be more the likely to help you if you contact them early and are up front and honest with them about your current situation. But you should also be honest with yourself and never try to save a home you just cannot afford, it will wind up costing you more money, stress and credit points then it is worth.

There are many mortgage products in the market now days. Therefore, it is very important that buyers do their homework to determine what type of mortgage is best for them. The best mortgage is the mortgage that best fits the personal situation of the buyer. Buyers should look at the following issues before signing a loan.

• Look carefully at the current financial situation.

• Make a very realistic determination of much you can afford.

• Decide how long you expect to be in the house.

• Determine how much will you be putting as the down payment.

• Make sure you are comfortable with the payment.

• Understand the mortgage choices available in the market.

Following is a description of the most common mortgage choices available in the market:

1) Fixed mortgage rates are the traditional loans that have a fixed rate over the life of the loan. In other words, the interest rate on the note remains the same through out the terms of the loan. The payments handling the principal and interest will remain the same. Typically the life of these loans is 30, 25, 20, 15 years. This type of mortgage is recommended for buyers who want the safety of a constant mortgage payment and plan to stay in the home for longer than 7 years.

2) An Adjustable Rate Mortgage (ARM) is a mortgage where the interest rate on the note is periodically adjusted based on a variety of indexes. This type of mortgage typically starts at a lower interest rate; consequently, with lower interest payments, but interest rates fluctuate depending on market interest rates.

3) An Interest only Mortgage is a loan for set term, the borrower pays only interest on the principal balance, but the principal balance remains unchanged. At the end of the interest only term, the borrower pays the principal or converts the loan to a principal and interest type loan.

4) Balloon Mortgage is usually rather short with a term or 5 - 7 years; however, the payment is based on 30 years. This type of mortgage often has a lower type of interest rate, and it can be easier to qualify than the traditionally 30-years fixed rate. The risk for this type of mortgage is that at the end of the short term (5-7 years), the balance must be paid off or the loan must be refinanced.

5) A Negative Amortization Mortgage is a type of mortgage where the payment made by the borrower is less that the accrued interest. The interest difference is added to the loan principal. Consequently, the amount of the loan keeps increasing as time goes by. Potential home buyers must carefully consider this option as they may, in time, find themselves with a loan amount that greater than what the home is worth.

Once the buyer has determined what mortgage product is best for him/her, he/she will need to select the lender that offers the mortgage product that they want along with the best interest rate. Part of a job of a good lender is to educate you, the buyer, on the mortgage products and the options available for you.

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